Vol. 6 · pages 601–605

586 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES not propose to touch the gold-standard reserve, which must remain as it is as the ultimate guarantee of our currency policy. My proposal does not interfere with the existing arrangements in any way, but is merely supplementary to them …… Let the Government of India accumulate gold to the maximum limit of its capacity, but let the surplus gold which it cannot absorb be coined and circulated if the public chooses to do so. With our expanding trade and the balance in our favour, gold will continue to be imported in ordinary time, and if the facilities of minting are provided in India, it will go into circulation. ”* These are surely not the ways of promoting a gold currency. Indeed, they run counter to it. So long as the coinage of rupees goes on gold will not enter into currency. Indeed, to cry out on the one hand against the huge drawings of the Secretary of State and the consequent transfer of Indian funds to London and their mismanagement by the Secretary of State, and on the other hand to permit him to manufacture additional token coinage of rupees, is to display not only a lamentable ignorance of a fundamental principle of currency, but also to show a complete failure to understand the precise source from which the whole trouble arises. It is true that the Government of India cannot bind the Secetary of State to any particular course of action,† and he often does override the provisions of the Annual Budget. But the question remains. How is it that he is able to draw so much more after 1893 than he ever did before ? It must be remenbered that whatever the Secretary of State does with the funds in London he must pay for his drawings in India. Before 1893 he drew less because his means of payment were less ; after 1893 he drew more because his means of payment were greater. And why were his means of payment greater ? Simply because he had been able to coin rupees. Indeed, the amount of drawings are limited by the demand for them and by his capacity to coin rupees. It is therefore foolish to blame the Secretary of State for betraying the interests of India and at the same time to permit him to coin rupees, the very means by which * S.L.C.P., Vol. L, pp. 637-38. Italics not in the original. † The legal position of the Secretary of State and the extent to which he can be bound by the provisions of any law passed by the Government of India were well explained by Sir James Westland in his speech on the Indian Paper Currency (Amendment) Bill, which afterwards became Act II of 1898 ; compare also the peculiar wording of that Act.

587A RETURN TO THE GOLD STANDARD he is able to betray. If a gold currency is wanted, and it is wanted because the rupee is a bad standard of value, then what is necessary is not to put a limit on the drawings of the Secretary of State or the opening of a gold Mint, but a short enactment stopping the coinage of rupees. Then only gold— made legal tender, at a suitable ratio with the rupee—will become a part of Indian currency. That the stoppage of rupee coinage is a sufficient remedy is amply corroborated by the now forgotten episode in the history of Indian currency during the years 1898-1902. Within the short space of a year and a half after gold had been made legal tender the Hon. C. E. Dawkins, notwithstanding the fact that there was no gold Mint, was able, in his Budget speech in March, 1901, to observe :— “India has at length emerged from a period of transition in her currency, has reached the goal to which she has been struggling for years, has established a gold standard and a gold currency, and has attained that practical fixity in exchange which has brought a relief alike to the private individual and to the Government finances.”* So great was the plethora of gold that Mr. Dawkins further remarked †:— “ …… We have been nearly swamped …… by gold …….” The transformation in the currency position which then took place was graphically described by Lord Curzon, the then Viceroy, in the following words‡ :— “Mr. Dawkins …… has successfully inaugurated the new era under which the sovereign has become legal tender in India, and stability in exchange has assumed what we hope may be a stereotyped form. This great change has been introduced in defiance of the vaticinations of all the prophets of evil, and more especially of the particular prophecy that we could not get gold to come to India, that we could not keep it in our hands if we got it here, but that it would slip so quickly through our fingers that we should have even to borrow to maintain the necessary supply. As a matter of fact, we are almost in the position of the mythological king, who * Financial Statement, 1900-1, p. 14. † Ibid., p. 19. ‡ Ibid, p. 167.

588 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES prayed that all he touched might be turned into gold, and was then rather painfully surprised when he found that his food had been converted into the same somewhat indigestible material. So much gold, indeed, have we got, that we are now giving gold for rupees as well as rupees for gold, i.e. we are really in the enjoyment of complete convertibility—a state of affairs which would have been derided as impossible by the experts a year ago.” Compare this state of affairs in 1900-1 with that found to exist in 1910-11, for instance. Speaking of the currency situation as it was in that year, the Hon. Sir James (now Lord) Meston, observed*:— “We have passed through many changes in currency policy and made not a few mistakables. but the broad lines of our action and our objects are clear and unmistakable, and there has been no great or fundamental sacrifice of consistency in progress towards our ideal. Since the Fowler Committee that progress has been real and unbroken. There is still one great step forward before the ideal can be reached. We have linked India with the gold countries of the world, we have reached a goldexchange standard, which we are steadily developing and improving. The next and final step is a true gold currency. That, I have every hope, will come in time……” Leaving aside for the moment the extenuatory remarks of the speaker, the fact remains that in 1900 India had a gold currency. But, taking stock of the position at the end of 1910, it had ceased to have it. What is it that made this difference ? Nothing but the fact that between 1893-1900 no rupees were coined, but between 1900-1910 the number of rupees coined was enormous. During the first period the inducement to coin rupees was very great indeed. The exchange was not quite stable, and the Government had still to find an increasing number of rupees to pay for the “Home Charges.” And an Honourable Member† of the Supreme Legislative Council actually asked :— “Is there any objection to the Government working the Mints on their own account ? Considering the low value of * Financial Statement, 1910-11, p. 346. † This was no other than the Hon. Fazulbhai Vishram, the well-known financier of Bombay. Cf. his spech in the Financial Statement, 1894-95, p. 96

589A RETURN TO THE GOLD STANDARD silver and the great margin between the respective prices of bullion and the rupee, would not Government by manufacturing rupees for itself make sufficient profit to meet at least a substantial portion of the present deficit ? It seems to me to be a legitimate source of revenue and one capable of materially easing our finances.” But Sir James Westland, who was then in charge of the finances of India, replied*:—I “I must confess to a little surprise in finding the proposal put forward by one of the commercial members of your Excellency’s Council that we should buy silver at its present low price, and coin it for issue at the appreciated value of the rupee …… I shall certainly refuse myself to fall into this temptation.” Again, 1898, when some of the followers of Mr. Lindsay desired that Government should coin rupees to relieve the monetary stringency, Sir James Westland remarked†:— “ ……in our opinion the silver standard is now a question of the past. It is a case of vestigia nulla retrorsum. The only question before us is how best to attain the gold standard. We cannot go back to the position of the open Mints. There j are only two ways in which we can go back to that position, We can either open the Mints to the public generally, or we can open them to coinage by ourselves. In either case what it means is that the value of the rupee will go down to something approaching the value of silver. If the case is that of opening the Mints to the public, the descent of the rupee will be rapid. If it is that of opening only to coinage by the Government, the descent of the rupee, may be slow but it will be no less inevitable.” The Hon. C. E. Dawkins was equally emphatic in his denunciation of the project of Government coining rupees. When he was tempted to acquiesce in the proposal by holding out the prospects of a profit from coinage, he replied‡:— “I think I ought ….. to beg my hon. friend not to dangle * Financial Statement, 1894-95, p. 123. ‡ Ibid., 1900-1, p. 163. † Ibid., 1898-9, p. 169.

590 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES the profits on silver too conspicuously before the eyes even of a most virtuous government. Once let these profits become a determining factor in your action, then good-bye stability.” Another instance of the Government’s determination not to coin rupees is furnished by inquiring into the reasons as to why it is that the Government has never assumed the responsibility of selling council bills in indefinite amount and at a fixed rate. The Chamberlain Commission argued that the Government cannot undertake such a responsibility because it cannot hold out for a fixed rate, and may have to sell at any rate even lower than par. This is true so far as it is a confession of a position weakened by the Government’s folly of indulging in excessive rupee coinage. But this was certainly not the explanation which the Government gave in 1900 when it was first asked to assume that responsibility. The Government knew perfectly well that to keep on selling bills indefinitely was to keep on coining rupees indefinitely. They refused to assume that responsibility because they did not want to coin rupees. That this was the original reason was made quite plain by the Hon. Mr. Dawkins,* who reminded those who asked Government to undertake such a responsibility that “the silver coin reserve of Government in consequence rapidly neared a point at which it was impossible to continue to meet unlimited transfers [i.e. council bills]. Therefore the Secretary of State decided to limit the demands by gradually raising the rate, thus meeting the most urgent demands, and weeding out the less urgent, while warning those whose demands were not so urgent to ship gold to India. No other course was practicable. The liability of the Secretary of State to keep the tap turned on indefinitely at 1s. 4 5/32d. has been asserted. But I cannot see that any positive liability exists, and I wonder if those who assert its existence would have preferred that the stability of our currency (whose situation they are well able to appreciate and follow) should have been affected by the reserve of rupees being dangerously reduced ?” [and which could not be augmented except by coining more rupees]. Just at the nick of time, when the ideal of a gold standard with a gold currency was about to be realized, there came on * Cf. his Budget speech, Financial Statement, 1900-1, p. 27.